William A. Graham Co. v. Haughey
646 F.3d 138
| 3rd Cir. | 2011Background
- Graham sued Haughey and USI for surreptitious use of Graham's copyrighted binders from 1992 to 2005 in preparing insurance proposals.
- Infringement was indirect (using the copyrighted materials to sell products) and was not a direct reproduction-for-sale; discovery of the conduct occurred around November 2004.
- Jury awarded Graham nearly $19 million in profits plus over $4.6 million in prejudgment interest; district court entered judgment consistent with that framework.
- Second phase: after storm-warnings theory, district court limited damages to amounts within three years of suit and awarded about $1.4 million to USI and $268,000 to Haughey; the parties cross-appealed.
- Third Circuit affirmed the verdicts and rejected the storm-warnings theory; held prejudgment interest available at district court discretion and began accruing from the initial accrual date.
- Court clarified accrual vs. discovery rule: accrual occurs when elements of a claim exist; discovery tolls the limitations period but does not alter accrual; prejudgment interest should run from accrual date (1992).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the damages award is excessive. | Graham argues prognosis supports the award given misappropriation as a driver of profits. | Haughey/USI contend the award overstates profits given non-infringing factors and boilerplate text. | Not shocks the conscience; affirm damages. |
| Whether prejudgment interest is available in infringers' profits cases under the Copyright Act. | Graham seeks prejudgment interest to make whole and prevent unjust enrichment. | Interest should be unavailable or limited in infringers'-profits cases. | Prejudgment interest is available at the district court's discretion. |
| From what date should prejudgment interest accrue in this case. | Interest should begin when damages were accrued and the infringing profits were realized (1992). | Interest should commence only from discovery (2004) under the discovery rule. | Accrual occurs in 1992; discovery tolls limitations, but does not delay accrual or begin interest. |
| What is the proper meaning and application of the discovery rule in this context. | Discovery rule delays accrual; Graham I supported this. | Discovery rule misapplied; accrual should not be undermined. | Discovery rule tolls, not accrues; clarified and aligned with accrual concept. |
Key Cases Cited
- Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700 (9th Cir. 2004) (causal nexus required for infringers' profits damages)
- Merck & Co. v. Reynolds, 130 S. Ct. 1784 (Sup. Ct. 2010) (discovery defined in context of accrual for limitations)
- Skretvedt v. E.I. DuPont de Nemours & Co., 372 F.3d 193 (3d Cir. 2004) (broad discretion to award prejudgment interest; fairness considerations)
- Pignataro v. Port Auth., 593 F.3d 265 (3d Cir. 2010) (interest awarded based on considerations of fairness)
- West Virginia v. United States, 479 U.S. 305 (Sup. Ct. 1987) (prejudgment interest serves to compensate for loss of use of money)
- Fine v. Checcio, 870 A.2d 850 (Pa. 2005) (accrual concepts and tolling discussed in state law context)